Mortgage Servicing Fraud
occurs post loan origination when mortgage servicers use false statements and book-keeping entries, fabricated assignments, forged signatures and utter counterfeit intangible Notes to take a homeowner's property and equity.
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Bear Stearns Faces Indictment Over Collapsed Hedge Funds

Bear Stearns may be in serious legal jeopardy over the collapse of two credit hedge funds last year.

Already facing hundreds of millions in claims from aggrieved investors, who lost $1.6 billion in the High-Grade Structured Credit Fund and a more levered sister vehicle, the Wall Street firm is now facing the prospect of a federal indictment.

Federal prosecutors are in talks with high-ranking Bear executives, CNBC’s Charlie Gasparino reports, and have already spoken with Rich Marin, the former head of Bear Stearns Asset Management. According to Gasparino, an indictment of the firm is possible.

The two Bear funds went bankrupt last year after huge losses in subprime mortgage-linked bonds and other credit assets.

In December, the Securities and Exchange Commission announced it was investigating the withdrawal of $2 million from the funds by former manager, Ralph Cioffi, who has since left the firm.

Prosecutors question former Bear Stearns exec: report
Thu Feb 7, 2008 8:45am EST

NEW YORK (Reuters) - Federal prosecutors are talking to high ranking officials at Bear Stearns Cos Inc (BSC.N: Quote, Profile, Research) after the collapse of two hedge funds last summer, and an indictment of the firm is possible, CNBC's reporter Charlie Gasparino said on Thursday.

Prosecutors recently spoke to former asset management head Rich Marin, Gasparino said. A spokesman for Bear Stearns was not immediately available for comment.

Bear's shares fell about 3 percent in pre-market trading to $79.60 after the report.

(Reporting by Dan Wilchins; Editing by Derek Caney)


Bear Stearns, Fortress Talked Merger
Bear Hedge Fund Manager Cioffi Out
Hedge Fund Investors File Legal Claims Against Bear Stearns
Bear Wants Manager Of Bad Hedge Funds To Stay
Mass. Sues Bear Over Collapsed Hedge Funds
Collapsed Hedge Fund Investors Seek Bear Ouster
Bear Bitten By Hedge Fund Collapses, Mortgage Crisis

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Bear Stearns Fund Probe
The latest on the Bear Stearns fund probe, with CNBC's Charlie Gasparino
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Another good post Blossom.

Okay folks let get this straight right up front.  If it was another corporation in

another industry they might have a chance.  But unfortunately firms like Bear

Stearns/EMC and Ameriquest/AMC/Citi Residential made their living in large

part through crime and corruption.  The fact that mid and lower level employees

were isolated from the overall picture which was a real horror story

demonstrates intent. Mainstream employees at Bear/EMC only heard the

rumors around the water cooler and some I talked to seemed to be blissfully

unaware of the Bear Stearns/EMC crime scheme.

Intent.  That is what is demonstrated by the Bear/EMC process of keeping

employees even as high as Supervisors unaware of the Bear/EMC crime

methodology of cheating both customers and investors.

An even more important aspect in establishing clear and convincing evidence

of intent to defraud is found in the tell-tale numbers camouflage that EMC/Bear

used to attempt to hide intentional fraud.  The explanation of “sloppy bookwork”

can only be used 2 or 3 times in a row.. But around that 4th time when the

“errors” demonstrate a clear pattern of consistently helping only Bear/EMC is

when even the more naive prosecutors finally catch on.  The methods that

Bear/EMC has used for years will actually work on 95% of their customers. 

Unfortunately many of them simply don’t understand bookkeeping fraud and

are easily discouraged by insider jargon.  But if the prosecutors have a good

numbers point man, the Bear is going to be officially barbequed.

Last chance for Bear/EMC: The only chance the high ranking executives at

Bear/EMC will have is full cooperation with the authorities.. But alas!  They

are just not built that way.  Arrogance, fraud, and underestimating those they

are trying to hoodwink is a way of life at EMC/Bear Stearns. All their instincts

will tell them that their $800-$1,000 an hour attorneys will likely once again allow

them to sneak out the back door.

                  BUT HERE’S SOMETHING they didn’t count on:

This time around there will be high ranking executives that know how the insider    

   scams worked that will tell the truth for immunity to save their own skin.   

The mid level and lower level Bear Stearns employees will be off the hook as

long as they don’t lie under oath.  But again most only had a vague idea of the

crime factory that Bear Stearns/EMC mortgage really was. That was by design.

There will be a recovery of actual dollars that were defrauded of about 5 cents

on the dollar.  But the victims will have this solace:  Some of the top criminals

that were calling the shots will go down. They’ll at last face a harsh form of

justice that even a billion dollars in attorney’s fees can’t circumvent.

     * * * * * * * * * * * * * * * * * * * * * * * * * * * * *

     The Bear Stearns/EMC scorched earth pattern of manufacturing

illicit premature foreclosures with no semblance of equity or compassion

                 for their victims will come back to haunt them.  


      * * * * * * * * * * * * * * * * * * * * * * * * * * * * *

    Bear/EMC was able to steamroll the homeowners who trusted them.

      Such will not be the case with their investors.




     Ed Cage  |  Plano Texas  |  972-596-4363  |    

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DOJ to Boost Billables for the Street’s Outside Counsel

Wall Street Journal - Posted by Amir Efrati  

justice deptHave your Wall Street clients misled investors by booking inflated prices of mortgage bonds despite knowledge that valuations had dropped? Did they value mortgage bonds differently on their own books compared to the holdings of customers? Or did they change the way they valued the bonds to avoid or forestall taking big losses?

If you represent a big financial firm on the Street and answered “maybe,” “no” or “I don’t know” to any of the above, you may soon get a call from your neighborhood U.S. attorney’s office.

Responding to the subprime mortgage-market collapse, DOJ’s emissaries are now getting into the act that’s kept the SEC and a few state AGs in high gear lately. Unlike those regulators and prosecutors, who mainly have civil enforcement powers in this area, the U.S. attorneys are searching for criminal conduct.

According to an article in today’s WSJ, the Manhattan U.S. attorney’s office is looking to get information on Merrill Lynch’s handling of mortgage bonds, while its Brooklyn rival has opened probes into two internal hedges funds at Bear Stearns that collapsed last summer because of subprime-related losses and, as WSJ reported Saturday, into UBS’s mortgage-bond valuations.

In addition to the questions listed at the top of the post, regulators are looking at whether financial firms:

  • properly disclosed the risky nature of mortgage bonds to investors and credit-rating firms
  • improperly accounted for certain off-balance-sheet entities that held mortgage bonds
  • insured mortgage bonds after finding out that their values were inflated

    In today’s WSJ story, ex-prosecutor Michael McGovern in NYC made the point that especially given the potential subjectivity of valuation, criminal cases could be tough to bring “because of the complexity, the availability of defenses and the difficulty of proving intent.”

    Law Blog readers: What’s your take on the subprime mess and Wall Street and the reach of the criminal law? Do the two not mix? Or is it high time prosecutors did their thing? And if you care to share specifics, please email me at

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    Excellent input again Blossom. We’re awfully lucky to have you!


    But as Winston Churchill so aptly put it, “This is not the end (of

    mortgage servicing fraud), it is not even the beginning of the end,

    but it is the end of the beginning” in closing this historic and pivotal

    chapter in rampant economic crime on a grand scale and how a

    few greedy insiders were able to so dramatically affect America

    and the rest of the financial world.


                  I predict that Bear Stearns/EMC will fall the

      farthest and the hardest.  Let their epitaph read, “They were

         able to steamroll the homeowners but not the investors.”    


    Here's a few excerpts from highly respected insider Jake Zamansky:


    _   _   _  ON:

    On Subprime Mortgage Litigation:
    "As of December 2007, 32 class action lawsuits have been filed by

    investors against the subprime mortgage lenders, Wall Street firms

    who underwrote MBS (mortgage backed securities) and CDOs,

    (Collateralized Debt Obligation) and investors who purchased shares

    of hedge fund, bond funds and other securities containing subprime

    mortgage exposure."

    _   _   _

    "Some analysts estimate that the total write down could reach a

    staggering $800 billion by 2008-2009. Major firms who have had to

    take multibillion dollar write-downs include Citigroup, Merrill Lynch,

    UBS and Bear Stearns."

    _   _   _


    On Legislative Proposals:*
    "On December 6, 2007, President Bush announced a plan by bank

    regulators and the U.S. Treasury Department to freeze rates on some

    adjustable mortgages for up to five years."

    _   _   _
    “They say where there’s smoke, there’s fire. And in my thirty years working
    on behalf of defrauded investors nowhere is that more true than on Wall
    Street. At Bear Stearns, there’s a raging inferno.”

    _   _   _  OFF


    Respectfully submitted by

    Ed Cage  |  1804 Cross Bend, Plano Texas  |  |  972-596-4363


    * Unfortunately although I am a staunch Republican and a former GOP State Delegate,

    I must confess I was terribly disappointed in Bush’s very narrow cosmetic solution to a

    crisis he has clearly underestimated. ..Perhaps he’s decided to leave this economic

    catastrophe for Clinton and Obama.    Translation: Our National Defense will very likely

    be slashed to tidy up this financial disaster caused by a few well positioned but greedy

    quick-money changers.


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    The Plaza

    Lloyd Blankfein and Sanford Weill are among the current and former Wall Street heavyweights who have recently bought into 15 Central Park West, New York’s uber-luxurious new condominium complex.

    But James Cayne, the chairman and, until recently, chief executive of Bear Stearns, has chosen a different trophy address. Documents filed with the city of New York on Friday show that Mr. Cayne and his wife, Patricia, closed this month on an apartment at The Plaza, the storied former hotel that has been converted into high-end condos. At $2.4 million, the sale price is rather modest compared to what some other pads at The Plaza have fetched. In November, Kenneth Moelis, the former head of investment banking at UBS, paid $11 million for an apartment there.

    In September, Ronald L. Sargent, the chairman and chief executive of Staples, paid $5.8 million for a 1,212-square-foot one-bedroom apartment in The Plaza. That same month, David Barger, the chief executive of JetBlue, paid $10 million for his 2,600-square-foot two-bedroom apartment on a higher floor.

    Harry Macklowe, the real-estate mogul who has been under a bit of financial pressure lately, shelled out nearly $60 million in June for virtually all of the Plaza’s seventh floor.

    City records show Mr. Cayne went to contract on his apartment in The Plaza nearly two years ago, before the mortgage-related problems that forced two Bear Stearns hedge funds into bankruptcy, vaporizing about $1.5 billion of investors’ money and dealing a serious blow to the firm’s reputation.

    The sale closed Feb. 5, less than a month after Mr. Cayne agreed to step down as Bear’s chief executive.

    4 comments so far...

    • 1.

      Let’s hope Cayne’s apartment is non-smoking….

      — Posted by cheech & chong

    • 2.

      This isn’t news, its People magazine style gossip.

      — Posted by BigMovieFan

    • 3.

      I hope Mr. Cayne did not have problems getting a mortgage.

      — Posted by Alex

    • 4.

      Wow. This is truly newsworthy stuff. What’s the point, NY Times? Are you trying to make me sick with jealousy, or simply trying to reinforce what I already know, that Manhattan and many other areas of the 5 boroughs have degenerated into a dull playground for investment bankers? Hey, about about just FIVE rooms each for Lloyd Blankfein and Sanford Weill, and a lottery for the rest of us schmoes to buy in cheaply? Nah. Who cares about the rest of the bums in this city, right?

      — Posted by Joe

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    Anybody else hear anything about a BS takeover today?

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    Blossom, Smurf and Gary:

    There were considerable rumors of a Bear takeover from insiders in late fall and the summer of last year as insiders saw all the signs of the inevitable Bear collapse. I myself called the EMC collapse in advance of it actually happening because even a novice like me could see the walls giving in.. EMC has been defunct for all practical purposes for about 6 months.. They’re on life support “servicing” the existing accounts under the Bear umbrella which has since sprung leaks galore itself. Bear stock is swirling down the toilet in an ever tightening spiral although this “takeover” sparked a modest upward bump.  

          I correctly predicted EMC’s abrupt demise along about the time they began encouraging their customers to switch to Bear Residential. I had subsequently predicted a Bear Residential collapse along about Super Bowl time but it hasn’t happened yet.  It will fail as well in spite of the tricks with mirrors that the EMC/Bear gang is so fond of.

         What I’m curious about is how the Bear hierarchy can possibly think that focusing on servicing” is the key to turning Bear around. The EMC/Bear reputation (har-har) is forever trashed.  Bear itself is yet another victim (albeit ironic) of their own unashamed illicit schemes to defraud both customers as well as investors.

                                                    _   _   _


    As the hierarchy falls as at the top Bear Residential will be relegated to the same defunct status as EMC and AMC. Functioning in name only.. Make no mistake the wounded Bear is on life support phasing out accounts that will eventually be sold at fire sale prices. 


    Ed Cage | Plano Texas | | 972-596-4363

    This is a hot topic and I'll start a Bear / EMC subject thread to keep up with it and seek further input. Here's the latest on the wounded Bear takeover Gary:



    Bear Stearns Has No Plans to Expand CITIC Ties


    By Reuters | 15 Feb 2008 | 12:32 PM ET

    Bear Stearns has no plans to expand its relationship with China's biggest brokerage, CITIC Securities, CNBC has learned.


    Shares of Bear Stearns [BSC  82.79    4.32  (+5.51%) ]    rose sharply on Friday on renewed takeover chatter about the Wall Street bank, including the possibility that CITIC was in talks to acquire a bigger stake in Bear.


    Bear Stearns  stock is up "on renewed takeover chatter," said Paul Foster, options strategist at Web information site in Chicago.


    "We do not comment on market rumors," said a Bear Stearns spokesman.


    Copyright 2008 Reuters. Click for restrictions.

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    "Bear Stearns  stock is up on renewed takeover chatter," said Paul Foster, options strategist at Web information site in Chicago.


    "We do not comment on market rumors," said a Bear Stearns spokesman."



    Smurf the two quotes above are from a 2-15-08 report.


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    Cayman Islands International Fishing Tournament 


    Back To Top News

    Hedge fund investors fight back
    Published on Monday, February 25, 2008Email To Friend    Print Version

    Hon Anthony Smellie
    Chief Justice

    According to a report in the Financial Times (FT), investors in two failed Cayman-registered hedge funds began legal action here on Tuesday in an attempt to seize control of the funds, which they hope to use as a platform to demand compensation from US investment bank, Bear Stearns.

    The hearings listed for the Grand Court over 19 to 21 February before the Chief Justice Hon Anthony Smellie, are reported by the FT to involve a group of rebel shareholders in the Bear Stearns Enhanced Leverage Overseas and High Grade Overseas funds, who are now attempting to reverse the bank’s decision to put them into liquidation.

    Apparently, investors had waged a successful campaign to appoint their own directors to one fund, a move to gain control that was blocked when the fund was put into liquidation.

    The case represents just another facet in the complex legal action against Bear Stearns after the failure of the two hedge funds last July, with a combined loss of $1.6 billion, after bad investments in sub-prime mortgages.

    In addition to the Grand Court action, and legal battles in the USA to decide whether or not the company can protect their US assets using Section 15 of the Bankruptcy Regulations, Bear Stearns is being sued by Barclays bank over losses from loans it provided, and faces probes from US regulators and criminal authorities.

    The Grand Court hearing is the latest move by this particular group, who claim to represent more than a quarter of investors in both the US and offshore versions of the Enhanced Leverage fund.

    Under the leadership of international law firm Reed Smith, they hope that the current moves will provide better access to documents, which they need to secure compensation from Bear Stearns.
    Included in what are understood to be some very complex legal arguments, some investors allege that Bear Stearns downplayed the risks involved and were using valuation models that overvalued the funds.

    The saga began when the value of two hedge funds, which were heavily committed to the sub-prime lending market, collapsed.

    There then followed a protracted and continuing fight in the USA over whether or not creditors could pursue Bear Stearns for compensation using US bankruptcy regulations.

    In dispute is whether or not the Cayman Islands liquidation protected the company from similar action in the USA.

    As 2007 drew to a close, news was released that the US Attorney’s Office and the Securities and Exchange Commission (SEC) were looking at whether one of Bear Stearns’ senior managing directors, Ralph Cioffi, continued to promote the now-bankrupt funds while removing US$2 million of his own investments from them. The allegation being that this act amounted to insider trading. Reports in the USA say Mr Cioffi left Bear Stearns ‘by mutual agreement’ on 28 November 2007.

    Banking giants Barclays then also joined the chase, filing claims for over CI$400 million, which allege Bear Stearns sold bad debts before they would have to be written down at a loss. Barclays alleges fraud, conspiracy and a breach of fiduciary duty.

    Other groups have filed arbitration claims, a course they regard as more straightforward, quicker and not subject to complex appeal processes or legal delaying tactics, in order to recover lost investments.

    The major complaint being pursued against Bear Stearns appears to be that the failed hedge funds were being sold to investors as low risk options when, according to one noted expert in the field and reported in BusinessWeek, more than 60 percent of the net assets in one of the funds “were so illiquid or obscure that management randomly assigned their value.”

    In the meantime, Massachusetts Secretary of State William F. Galvin has been continuing his assault on Bear Stearns, who he has charged with engaging in inappropriate trading. An allegation he says is based on records, which apparently show the company traded from its own account with the hedge funds without making the required notifications to the funds’ Cayman Islands-based independent directors.

    Two directors based in Grand Cayman have apparently refused to respond to attempts by Massachusetts’ regulators to subpoena them.

    Other reports complain that the US$500,000 allocated to the accountants entrusted with the hedge funds’ liquidation is inadequate to ensure that the necessary work is conducted properly.


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